Canadian Dollar Climbs to 2.5-Month High on US Tariff Suspension

The Canadian dollar rose to its strongest level in two and a half months against its U.S. counterpart on Wednesday, driven by a pause in new U.S. tariffs on Canadian goods and a widespread softening of the greenback.

The loonie traded 0.5% higher at 1.3823 per U.S. dollar, or 72.34 U.S. cents, its most robust valuation since June 2, according to an Investing.com report.

Tariff Relief Boosts Loonie

The currency's primary catalyst was an announcement late Tuesday from U.S. President Donald Trump, who confirmed a three-day delay on new 50% tariffs that were set to take effect on Canadian products. The President stated that the two nations had reached a deal, providing a temporary lift to the Canadian currency.

However, the outlook remains contingent on upcoming talks. "A three-day suspension of threatened US tariffs, announced overnight, has offered the loonie a temporary reprieve, though whether this persists will hang on the outcome of negotiations in the coming days," strategists at Monex Europe noted.

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Broader US Dollar Weakness

The Canadian dollar's advance was also supported by a weaker U.S. dollar, which fell against a basket of major currencies. The move came as a recent selloff in U.S. Treasuries showed signs of easing, with investors awaiting minutes from the Federal Reserve’s latest policy meeting for further direction.

Yields on 30-year U.S. Treasuries retreated from levels near a 19-year high. This followed a U.S. Treasury Department announcement that it would double the size of its liquidity support buyback operations for longer-dated government bonds, which helped stabilize the bond market.